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Inquiry Report Compulsory Licensing Productivity Commission of Patents Inquiry Report No. 61, 28 March 2013 Commonwealth of Australia 2013 ISSN 1447-1329 ISBN 978-1-74037-429-3 This work is copyright. Apart from any use as permitted under the Copyright Act 1968, the work may be reproduced in whole or in part for study or training purposes, subject to the inclusion of an acknowledgment of the source. Reproduction for commercial use or sale requires prior written permission from the Productivity Commission. Requests and inquiries concerning reproduction and rights should be addressed to Media and Publications (see below). This publication is available from the Productivity Commission website at www.pc.gov.au. If you require part or all of this publication in a different format, please contact Media and Publications. Publications Inquiries: Media and Publications Productivity Commission Locked Bag 2 Collins Street East Melbourne VIC 8003 Tel: (03) 9653 2244 Fax: (03) 9653 2303 Email: [email protected] General Inquiries: Tel: (03) 9653 2100 or (02) 6240 3200 An appropriate citation for this paper is: Productivity Commission 2013, Compulsory Licensing of Patents, Inquiry Report No. 61, Canberra. The Productivity Commission The Productivity Commission is the Australian Government’s independent research and advisory body on a range of economic, social and environmental issues affecting the welfare of Australians. Its role, expressed most simply, is to help governments make better policies, in the long term interest of the Australian community. The Commission’s independence is underpinned by an Act of Parliament. Its processes and outputs are open to public scrutiny and are driven by concern for the wellbeing of the community as a whole. Further information on the Productivity Commission can be obtained from the Commission’s website (www.pc.gov.au) or by contacting Media and Publications on (03) 9653 2244 or email: [email protected] Australian Government Productivity Commission Melbourne Office Level 12, 530 Collins Street Melbourne VIC 3000 Locked Bag 2 Collins Street East Melbourne VIC 8003 Telephone 03 9653 2100 Facsimile 03 9653 2199 Canberra Office Telephone 02 6240 3200 www.pc.gov.au 28 March 2013 The Hon David Bradbury MP Assistant Treasurer Parliament House CANBERRA ACT 2600 Dear Assistant Treasurer In accordance with Section 11 of the Productivity Commission Act 1998, we have pleasure in submitting to you the Commission's final report into Compulsory Licensing of Patents. Yours sincerely A ison McClelland Presiding Commissioner Terms of reference I, David Bradbury, Assistant Treasurer, under part 3 of the Productivity Commission Act 1998, hereby request that the Productivity Commission undertake an inquiry into the compulsory licensing provisions in the Patents Act 1990. Background - balancing access to technology and innovation The compulsory licensing provisions in the Patents Act 1990 are a key safeguard, which may be invoked where the exercise of the exclusive rights conferred by a patent are not meeting the reasonable requirements of the public or constitute anti- competitive conduct. In Australia, these provisions are used rarely and there are opposing views on their effectiveness. Infrequent use is attributed to significant barriers to accessing the provisions, or as a result of the deterrent effect of the provisions, which induces patent holders to enter into voluntary licences for their patented inventions. Australia is a net importer of technology. Of the 14,557 patents granted in 2010, 1,178 (8 per cent) were granted to Australian residents. Overall, the likely benefit of these provisions is their use as a deterrent in licensing negotiations between a foreign patent holder and potential licensee in Australia, in order to ensure domestic access to technology and technology diffusion. In November 2011, the Government’s Response to recommendation 12 of the Senate Community Affairs References Committee’s Gene Patents Report November 2010 and recommendation 27-1 of the Australian Law Reform Commission, Genes and Ingenuity: Gene Patenting and Human Health (ALRC 99, 2004) Report, endorsed a review of the operation of the compulsory licensing provisions in the Patents Act 1990, including measures to raise awareness of these provisions. Compulsory licensing is an increasingly sensitive issue internationally, particularly in the context of access to affordable healthcare, and concerns that gene patents may prevent equitable access to medical advice that relies on the identification and use of gene sequences related to human health and disease. Other areas of sensitivity include climate change mitigation, food security and alternative energy TERMS OF v REFERENCE technologies, and technical standards essential patents (e.g. in telecommunication technologies). Compulsory licensing provisions are a feature of many patent laws around the world, and are included in international agreements to which Australia is a party. Scope of the inquiry The Commission is requested to review the operation of the compulsory licensing provisions in the Patents Act 1990, in particular: 1. Assess whether the current Australian provisions can be invoked efficiently and effectively to deal with circumstances where reasonable requirements of the public are not being met or where the patentee engages in anti-competitive conduct. This includes, but is not limited to, consideration of concerns that gene patents may hinder access to affordable healthcare, including access to medical advice that relies on the identification and use of gene sequences related to human health and disease. 2. Advise on the frequency, and impact, of the issue of compulsory licences in comparable markets and the common features in such compulsory licenses. 3. Recommend any measures that may be required to efficiently and effectively exercise these safeguard provisions and invoke their use in a manner consistent with Australia’s international obligations, without limiting access to overseas technologies, technology transfer, research and development investments or substantially reducing the patent incentive for innovation. 4. Recommend any alternative mechanisms deemed necessary to ensure that the balance between incentives to innovate and access to technology best reflect objectives of ensuring reasonable access to health care solutions, maximising economic growth and growing the Australian manufacturing industry. 5. Recommend measures to raise awareness of these provisions and their purpose, including the specific challenges of raising awareness among small businesses and the healthcare sector. In conducting the inquiry, the Commission should have regard to: (a) the importance of incentives for industry and researchers to invest in research and development, and innovation; (b) access to and transfer of technology, including climate change mitigation, food security, healthcare and alternative energy technologies, and standard essential patents in telecommunication technologies, particularly where multiple patentees are involved; vi TERMS OF REFERENCE (c) affordable and equitable access to healthcare, including medical treatments and diagnostic tests in Australia; (d) recent changes to the intellectual property system reflected in the Intellectual Property Laws Amendment (Raising the Bar) Act 2012, including the research exemption; (e) other relevant parts of the intellectual property system, such as crown use provisions; and (f) the range of international approaches. The Commission will report within nine months of receipt of this reference and will hold hearings for the purpose of this inquiry. The Commission is to provide both a draft and a final report, and the reports will be published. The Government will consider the Commission’s recommendations, and its response will be announced as soon as possible after the receipt of the Commission’s final report. DAVID BRADBURY [Received 29 June 2012] TERMS OF vii REFERENCE Contents Terms of reference v Abbreviations xii Glossary xiv Overview 1 Recommendations and findings 23 1 Introduction 27 1.1 Focus of the inquiry 27 1.2 Report structure and the Commission’s approach 29 1.3 Consultation process for the inquiry 33 2 Rationale for patents and associated safeguards 35 2.1 Why have a patents system? 35 2.2 Options to foster innovation 37 2.3 Patent design 44 2.4 Compulsory licensing and other safeguards 46 3 Key features of patents systems in Australia and comparable markets 51 3.1 Key features of patents systems 52 3.2 Non-voluntary access to patents 57 4 Current utilisation of patents in Australia and comparable markets 63 4.1 Patenting of inventions 64 4.2 Exploitation of patents by the innovator 67 4.3 Patent sale 71 4.4 Licensing of patents 73 4.5 Patent thickets, pools and clearinghouses 83 CONTENTS ix 5 Specific concerns about patent access 91 5.1 Gene patents and healthcare 92 5.2 Standard essential patents 101 5.3 Access concerns for developing nations 105 6 Compulsory licensing provisions 113 6.1 Efficiency of the compulsory licensing process 114 6.2 Competition provisions 128 6.3 Reasonable requirements of the public 145 6.4 Interaction with international agreements 155 6.5 Dependent patent ground — is it still needed? 160 7 Crown use and acquisition 163 7.1 Current arrangements 164 7.2 Past reviews 167 7.3 Assessment and reform of Crown use 168 8 Other forms of non-voluntary access in Australia 183 8.1 Experimental exemption 183 8.2 Regulatory approval exemption 188 8.3 Compulsory licences for pharmaceutical exports 191 9 Other alternative
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